Phase 2

Phase 2: Remuneration of intermediaries: conclusions and recommendations

Phase 1 recommended a series of steps to introduce transparent disclosure of strata manager and broker remuneration.

Phase 2 reiterates the importance of Phase 1 and identifies three conflicts of interest and concludes that one of these, broker commissions, is a manageable conflict but the other two need to be addressed.

These two are where:

1. the strata manager agrees with the broker on a share of commission to be rebated to the strata manager, and
2. the broker agrees with the strata manager on a broker fee that is additional to the commission.

Together they comprise the commission rebate/broker fee system.

Following analysis of these conflicts, the view is taken that the commission rebate/broker fee system should be phased out.

Arising from this conclusion and associated considerations, it is recommended that this commission rebate/broker fee system be phased out in three stages comprising –

Stage 1: introducing transparent disclosure (Phase 1)

Stage 2: consolidating disclosure and preparing to phase out the system (2023 to 2024).

Stage 3: phasing out the system via structural realignment – the transition (from 2024).

It is proposed that the disclosure regime recommended in Phase 1 be introduced as soon as possible.

The third stage represents a deferral of remuneration reforms and should enable the new transparent disclosure regime to become bedded down before reforms are introduced.